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Strategy Execution

By June 14, 2021June 23rd, 2021No Comments
STRATEGY ALIGNMENT & EXECUTION

The six-stage management system

by Drs. Robert S. Kaplan and David P. Norton

Written by TM Nagarajan
Source by Drs. Robert S. Kaplan and David P. Norton
From Six stage strategy execution approach of Robert Kaplan and David Norton

Their latest approach involves a comprehensive and integrated management system that links strategy formulation and planning with operational execution. They have called it “Integrating strategy planning and operational execution – a six-stage system”. The approach was rolled out in an article titled “Mastering the Management System” in the January 2008 issue of the Harvard Business Review. The ideas are expanded in a book titled The Execution Premium, published in July 2008.

Stage 1: Develop the strategy using such tools as mission and vision statements, external analysis tools including PESTE analysis and Porter’s five forces, SWOT analysis, blue ocean strategies, scenario planning, dynamic simulations, and war-gaming. In this regard, companies need to answer three questions.

i) What business are we in and why?
ii) What are the key issues we face?
iii) How can we best compete?

Stage 2: Plan the strategy using such tools as balanced scorecards and strategy maps. Kaplan and Norton advocate addressing five questions at this stage.
i) How do we describe our strategy?
ii) How do we measure our plan?
iii) What action programmes does our strategy need?
iv) How do we finance our initiatives?
v) Who will lead strategy execution?
Stage 3: Align employees with the strategy through a formal communications process, and by linking employees’ personal objectives and incentives to strategic objectives. This will not necessarily be easy but maybe facilitated by “cascading down” balanced scorecards and strategy maps to all organisational units. Three critical questions need to be addressed at this stage.
i) How do we ensure that all business units are aligned?
ii) How do we align support units with business unit and corporate strategies?
iii) How do we motivate employees to help us execute the strategy?
Stage 4: Plan operations using such tools as rolling forecasts and budgets, process management, process dashboards, activity-based costing, and resource capacity planning. Two major questions need to be answered in respect of stage 4.
i) Which business process improvements are most critical for executing the strategy?
ii) How do we link strategy with operating plans and budgets?
Stage 5: Monitor and learn about barriers, problems, and challenges. This will be achieved through a carefully designed structure of management review meetings. These meetings should be short, highly focused, data-driven, and action-oriented. The review meetings need to focus on two key questions.
i) Are our operations under control?
ii) Are we executing our strategy well?
Stage 6: Test and adapt the strategy using internal data on operations and external data on the economic and competitive environment. This will launch a new cycle of integrated strategy planning and operational execution.

Conclusion:

It would be fair to observe that there is nothing radically new in this six-stage process. But it does provide a cohesive structure for aligning strategy planning and operational execution.

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